C-130 News: Air Force squandered millions of dollars on excess C-130J parts, IG says

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The Air Force mismanaged its inventory of spare C-130J Super Hercules parts, building up a stockpile worth tens of millions of dollars, according to a newly released report by the Pentagon’s top watchdog.

Maintenance and contracting officials were primarily focused on ensuring that spare parts were available and effective, but didn’t have adequate controls in place to prevent unneeded parts from being purchased, said the DoD Inspector General.

“As a result, the Air Force paid Lockheed Martin and Rolls-Royce to accumulate Air Force–owned excess C-130J spare parts inventory,” according to the IG report

How much excess inventory was accumulated by Lockheed is redacted, but investigators estimated an overstock of $17.1 million in parts from Rolls-Royce.

The IG actually finished its investigation in September 2014, but the report was classified until it was released March 29.

Air Force Times requested an update on the situation to see if the inventory management problems have been fixed, but had not received an answer by late Friday.

The Air Force’s emphasis on having parts available for operations encouraged the contractors to keep large numbers of the parts on hand, but Air Force contracting officials didn’t conduct reviews sufficient to determine how many parts it had, according to the IG report. They also didn’t evaluate whether the C-130Js were using up the parts at the same rate each year.

Though the released report didn’t specify the exact parts, investigators asserted the Air Force now has stockpiles of four types of C-130J components that should last longer than 110 years. Another 31 parts have an inventory life ranging from five to 75 years. Nine more spare parts were kept on hand despite never being needed between February 2009 and January 2013, the report said.

For example, in July 2013 the Air Force had 324 fuel spray nozzles in its inventory, worth $2 million. Yet that part was considered obsolete for the C-130Js and hadn’t been installed on one of the planes since at least 2009. The IG suggested transferring all 324 nozzles back to Rolls-Royce.

Air Force officials said in written responses (in 2014) that they would review the contracting procedures, but that ensuring spare parts were available when needed for operations was still their paramount concern.

Officials at the service’s Program Executive Office for Mobility who reviewed the report disagreed, however, that the extra stockpiles were costing the Air Force. The contract is structured, they said, so that private businesses shoulder the cost of keeping the excess parts and are only paid on a per-flying hour basis.

“Under both contracts, the contractor bears all cost risk for spare parts provided,” the response said. “Accordingly, the contractors are not paid the actual cost for the parts acquired. The … arrangement ensures the contractors have a significant financial incentive to control inventory.”

Investigators argued that managing and storing the spare parts is part of the contract the Air Force pays.

“The scopes of work … involved managing the entire process of planning requirements, purchasing parts, repairing parts and processing requisitions to provide the right parts at the right time in order to support aircraft hours flown,” the IG said. “Therefore, the spare parts are a major portion of the deliverable being purchased.”

“We acknowledge that a bona fide need for services existed,” the report stated. “But the reported excess inventory of approximately [redacted] for Lockheed Martin parts and $17.1 million for Rolls-Royce parts, indicated that the extent of the services and associated parts purchased from the contractors … was excessive to the Air Force’s need.”

Investigators gave two examples of parts from Lockheed Martin that were stockpiled far in excess of what was needed, and said the stockpiles could last for many years. However, what the parts were and how many year’s worth were overstocked is redacted in the report.

The information on Rolls-Royce parts is not hidden, however. The IG pointed to de-icing timing units for the C-130. The Air Force kept 33 on hand, an amount valued at $6.5 million. Yet records showed only three were being used per year.

Source: http://www.airforcetimes.com/story/military/2016/04/02/air-force-squandered-millions-dollars-excess-c-130j-parts-ig-says/82526048/

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